Ag Growth International Inc T.AFN.DB.J

RBC

[retiredcf]

July 28, 2023

AGI (Ag Growth International)
Settles claim related to September 2020 bin failure

TSX: AFN | CAD 56.00 | Outperform | Price Target CAD 70.00

Sentiment: Neutral

Our view: We are pleased to see a resolution of the primary litigation stemming from the grain bin failure in 2020, which removes most of the overhang related to the incident, although we expect a neutral reaction from AGI shares as the final financial impact is relatively moderate and the incident has already been well-understood by investors.

Summary: Ag Growth announced the company has agreed to pay $15.6M as part of the lawsuit settlement from a commercial grain bin failure in September 2020. At that time, one of the grain bins at Fibreco Export's North Vancouver McKeen Avenue terminal collapsed upon being fully loaded. As a result, AGI replaced the hopper base at all of the bins, including the collapsed bin, at the McKeen Avenue terminal, in addition to 20 other bins that were manufactured and supplied to another customer, but not yet commissioned, totaling 35 bins for a sales value of $19M. However, Fibreco initiated a lawsuit in June 2021, which cited AGI and the engineer responsible for the inadequate design which led to the silo's failure and up to $80M in losses for the export terminal operator.

The AGT claim remains outstanding, but Ag Growth continues to hold the position that the claim is without merit. AGT is a customer of Fibreco, but had no contractual relationship with Ag Growth.